The USD/CAD pair has had a rather bullish tone for some time now, as the oil markets continued to deteriorate. However, this pair saw a shooting star on the close for Tuesday, and this suggests that we are going to see a bit of a sell off at this point. The pair often follows oil markets, and because of this we have to watch the oil markets as well when making decisions in this pair.
The oil situation is of weaker than usual demand as the global situation gets weaker. The economic situation has most industries slowing down, and as such they will use less petroleum. The slowing demand is always bad for the Canadian dollar, and as a result I think the CAD continues to weaken overall.
The demand for oil won’t pick up until there is some kind of solution in Europe. This situation isn’t getting any better, and as such it looks as if the Fed could possibility ease if you listen to many pundits in the markets. This will drive up oil prices anyway, and as such this pair would follow. However, there is nothing at the moment that suggest that the Fed is actually going to ease, at least not officially.
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The pair looks as if the market is ready to pullback overall, and the move would be welcome as it would allow more buyers to come into the markets and buy this pair at a lower level. The pair should have supportive levels at 1.02, 1.01, and parity as the pullback continues. The pair will continue be very volatile as long as there is a significant amount of risks in the headlines. The pair will have to face the double whammy of the ever nervous of global risk and concerns, and the lower prices of the current move in oil. As long as the oil markets fall, the pair should rise. However, the pair has needed to pullback for some time, and we think this move is the start of a buying opportunity. As such, we are buying on pullbacks as long as we are above parity.